Explainer: How Amazon's battle with Reliance for India retail supremacy became a legal jungle

Future Enterprises

11/01/2022 06:11

By Aditya Kalra
    NEW DELHI, Jan 11 (Reuters) - For more than a year,
Amazon.com Inc  AMZN.O  and India's Future Group have been
locked in a complex legal stand-off that has stalled Future's
$3.4 billion sale of assets to the U.S. firm's rival Reliance
Industries  RELI.NS  - with no end in sight.
    Here's what the dispute, seen as key to deciding who gets an
upper hand in one of the world's fastest-growing retail markets
https://reut.rs/2OYLmMV, is all about.
    
    WHAT TRIGGERED THE DISPUTE?
    In 2019, Amazon and Future, number two player in India
behind market leader Reliance, became business partners when the
U.S. company invested $200 million in a gift voucher unit of the
Indian group. 
    That deal, Amazon argues, came with certain non-compete
clauses that prohibited Future from selling retail assets to
certain rivals, including Reliance, run by one of India's
richest men, Mukesh Ambani. The deal also included clauses for
settlement of any disputes under rules laid down by the
Singapore International Arbitration Centre.
    But in 2020, Future - hit hard by the COVID-19 pandemic -
decided to sell assets to Reliance. 
    Amazon then approached Singapore arbitrators and
successfully stopped the sale. Both parties have also challenged
each other with lawsuits in Indian courts, including the Supreme
Court, since the "seat of arbitration" remains in New Delhi and
Indian law governs the proceedings.

    WHAT DO AMAZON AND FUTURE SAY?
    Amazon argues various agreements signed in 2019 with Future
gave it special rights over Future's retail assets, some of
which it had also hoped to ultimately own should India's rules
for foreign investors be eased. The potential Future-Reliance
deal "destroys" the latter prospect, the U.S. company has said.
    Future denies any wrongdoing, saying Amazon is illegally
seeking to exert control on Future's retail business. Future
Retail  FRTL.NS  - the group's flagship retail arm - says it
faces liquidation https://reut.rs/2HBGN7F and its more than
27,000 employees can become jobless if the Reliance deal fails. 
    
    WHAT'S THE BIGGER PICTURE?
    At stake is whether Amazon can become a bigger force in a
$900 billion retail market https://reut.rs/2OYLmMV, with 1.3
billion consumers, from Reliance.
    Conglomerate Reliance has operations including 1,100
supermarkets, while Future has more than 1,500. Both are
expanding fast into e-commerce, but the Future deal will
immediately boost the retail footprint of Reliance, which has
attracted marquee foreign investors https://reut.rs/330Is1t in
the business.
    For its part, Amazon has invested $6.5 billion in India,
which it counts as a key growth market where it is a leading
e-commerce player. The Future partnership had already allowed
Amazon to boost its online portfolio of grocery deliveries by
integrating the Indian company's stores on its website.
    Keeping Future away from Reliance chimes with Amazon's
efforts to combat billionaire Ambani's growth plans. In one
confidential legal filing https://reut.rs/33nMWyN, Amazon said
Reliance's consolidated position with Future "will further
restrict competition in the Indian retail market".
    
    HOW DID INDIA'S ANTITRUST AGENCY GET INVOLVED?
    Future complained to India's antitrust agency, the
Competition Commission of India (CCI), that Amazon was making
incorrect and contradictory submissions about the intent of the
2019 deal.
    Amazon said it never concealed any information, but last
December the CCI suspended its approval https://reut.rs/3GIXGX0
 of the 2019 deal with Future, saying there was "a deliberate
design on the part of Amazon to suppress the actual scope" of
the deal and its interest in Future's retail businesses.
    While Amazon contends the CCI acted beyond its powers,
Future maintains the U.S company no longer has any right to
assert its claims as the 2019 deal itself now lacks regulatory
approval. 
    In a setback for the U.S. giant, the Delhi High Court this
month halted https://reut.rs/32Rb8tA the Singapore arbitration
proceedings between the two sides in light of the Indian
antitrust decision. 
    The arbitration has since been on hold, but Amazon has
appealed the decisions https://reut.rs/33hN1Ux in Indian courts
which are yet to hear the matter.

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
ANALYSIS-Battle of the billionaires – Bezos, Ambani gun for
India retail crown     https://reut.rs/2JcHaGd
FACTBOX-India retail - A nearly $900 billion market dominated by
mom-and-pop stores    https://reut.rs/2OYLmMV
 
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 (Reporting by Aditya Kalra in New Delhi; Editing by Kenneth
Maxwell)
 ((aditya.kalra@tr.com; +91-11-49548021; Twitter @adityakalra;))